Posts Tagged ‘government stimulus’

Is our economy truly rebounding as much as our equity markets may portend or are we riding high predominantly due to government stimulus similar to an economic anabolic steroid? Is our future as bleak as the numerous and sundry doomsayers would proclaim? Does it appear as if our economy has a split personality or is operating in two different realms? Do you often wonder what others—especially those in Washington—may be seeing if the economic landscape in your backyard remains very challenging?

I continue to believe our overall economy is operating and will continue to operate with a ‘walking pneumonia’ type condition. The massive debt burdens at all levels of our economy continue to serve as a drag and inhibit any sort of truly robust rebound. Let’s navigate and take the pulse of Rick Davis of Consumer Metrics Institute which captures real time discretionary online consumer activity. (more…)

I enjoy coming across individuals whom I have not previously met or read. Why? Individuals with new insights and perspectives provide real mental stimulus especially during challenging economic periods. I engaged just such an individual this morning in reading CFO Magazine. David Levy of the Jerome Levy Forecasting Center was recently interviewed and provided some fabulous insights on the economy, deflation, corporate earnings, bank balance sheets, and assorted other hot topics. This interview, entitled A Contained Depression, is a must read:

If you’re breathing a little easier because the Great Recession seems to be ending, consider this: the U.S. economy may remain in a “contained depression” for months or years to come. That warning comes from economist David Levy, chairman of the Jerome Levy Forecasting Center, an economic research and consulting firm. Levy originally coined the term to describe the recession of 1990–1991 and the subsequent halting, jobless recovery. Earlier this week, he talked with CFO about the prospect of a similar scenario unfolding today. An edited version of the interview follows.

What is the state of the economy today?
We’re in for a much longer period of contained depression [than we saw in the 1990s]. The single most overlooked observation about the U.S. economy in the postwar period is that balance sheets grew faster than incomes, decade after decade, both assets and liabilities. The problem is that asset values have to be justified by returns they can earn — or by expectations of future capital gains, and that’s where you get into bubbles. What went on in the postwar period couldn’t go on indefinitely. We were able to make it go on longer by dropping interest rates in the last two recessions, but we can’t do that anymore. We have to shrink the value of assets on balance sheets and shrink liabilities. And that makes it very difficult for the economy to operate. (more…)